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April 25, 2012

Investors Lost Confidence in April, Indexes Show

Along with Consumer Confidence Index, State Street and Spectrem surveys take moderate dips as investors cool to market conditions

One day after the Conference Board, an industry group, said its index of consumer attitudes edged down to 69.2 in April from 69.5 in March, three investor surveys released Wednesday showed similar results: The State Street Global Investor Confidence Index fell 3.9 points to 87.7 in April from 91.6 in March, while the Spectrem Affluent Investor Confidence Index dropped 3 points in April to 5, and the Spectrem Millionaire Investor Confidence Index dipped two points to 8.

“Affluent investors took a step back in April,” said George H. Walper Jr. (left), president of Spectrem Group, in a press release. "There was a significant decrease this month in the number who invested in stocks, and an increase in the number who chose not to invest. We also saw a downturn in confidence in the economy.”

The Spectrem Affluent Investor Confidence Index measures the investment confidence and outlook of households with $500,000 or more in net worth. The downtick ends seven consecutive months of index gains, according to the research organization, and reflects renewed caution toward the market and doubts that the economic recovery is taking hold.

Affluent investors also expressed increased confidence over last month in their household income and assets, according to the Spectrem Group. They also noted that stock market conditions are the primary factor most affecting their investment plans.

As for the recent drop in the State Street index, declining sentiment among Asian institutional investors was the driving force, as the ICI for that region decreased 7.5 points from 94.5 to 87.0.

“This is the second consecutive month that Asian investors have exhibited a pessimistic streak that is in contrast to their North American and European peers,” commented Kenneth Froot, a professor at Harvard and co-developer of the index, in a press release.

“The Asian ICI is now at an all-time low, and reflects particularly concerted selling of equities by Asian domiciled institutions. It would appear that concerns about the impact of slower growth both within and outside Asia are taking their toll and causing investors in that region to increase cash and fixed income holdings,” Froot said.

In other regions, sentiment was relatively static, with the North American ICI registering a decline of 0.7 points to settle at 88.8, and the European ICI ticking down by 0.1 point to reach 100.5.

“Among North American and European investors, we observed a somewhat selective approach to equity allocations this month,” said Paul O’Connell of State Street Associates, in a statement. “Investors cut back on their positions in Latin America, and instead allocated towards Europe and the U.K., though even these flows came to a halt in the last week of the data sample, as renewed concern around Spain’s ability to meet its debt burden surfaced.”

State Street’s global index represents activity from institutional investors in more than 45 countries who engage in more than 22 million transactions annually. The Spectrem Affluent Investor Confidence Index is based on 250 monthly online interviews with the financial decision-makers in households with $500,000 or more in investable assets, and he Spectrem Millionaire Investor Confidence Index is based on a subset of the overall survey group.

In terms of consumers nationwide, the recent dip in the Conference Board’s Consumer Confidence Index “was prompted by a moderation in consumers' short-term outlook, while their assessment of current conditions continued to improve," Lynn Franco, director of the Conference Board Consumer Research Center, said in a statement. "Overall, consumers are more upbeat about the state of the economy, but they remain cautiously optimistic."

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